Politics, Economics, and Life...from a conservative and libertarian perspective

Wednesday, January 30, 2013

Menendez, prostitutes, eye doctors, and Big Money

Senator Bob Menendez of New Jersey is in some serious hot water, that much is certain. Now in his third term as a U.S. Senator (the first term being only one year, as he took office via an appointment from Jon Corzine), Menendez is no stranger to scandal. But those scandals that have afflicted him thus far have been of a minor sort, more or less. During the last election, the scandal that never was involved a Menendez volunteer staffer who was both an illegal (expired visa) and a registered sex offender in his native Peru. I say "scandal that never was" because even though the individual in question was known to authorities at the ICE in October, he was not taken into custody until after the November elections at the request of the DHS:

Authorities in Hudson County notified ICE agents in early October that they suspected Sanchez was an illegal immigrant who was a registered sex offender and who may be eligible to be deported, according to the AP. ICE agents in New Jersey notified superiors at the Homeland Security Department because they considered it a potentially high profile arrest, and DHS instructed them not to arrest Sanchez until after the November election, one U.S. official told the AP. ICE officials complained that the delay was inappropriate, but DHS directed them several times not to act, the official told the AP.

Menendez claimed he was unaware of the staffer's status and frankly there is no reason not to believe him. However, the incident does suggest that there was no proper vetting going on at Menendez's HQ. And having the DHS intercede on the matter was a remarkable piece of good luck, because the issue would have made great fodder for Menendez's opponent.

In interviews, the two women said they met Menendez around Easter at Casa de Campo, an expensive 7,000-acre resort in the Dominican Republic. They claimed Menendez agreed to pay them $500 for sex acts, but in the end they each received only $100.

So Menendez not only uses prostitutes, he also shortchanges them. The Menendez campaign refused to comment on the story at the time, aside from calling it a "completely false accusation." Various other media sites more or less sloughed off the piece at The Daily Caller, treating it as no big deal, a blatant attempt to smear Menendez, or a story that just had no legs. The Atlantic Wire rightly notes that prostitution is legal in the Dominican Republic (say, isn't that the same place Charlie Rangel had a second home?) and that Menendez is himself no longer married, suggesting that even if the story was actually true it would be no big deal.

Yeah. Sure. If it had been an unmarried Republican so accused, would it still be no big deal? No, of course not. The liberal counter to that: "well, if it had been a Republican, chances are it would make him (or her) some sort of hypocrite." The problem with that counter: Menendez would also be a hypocrite if it were true, as he most definitely took exception to Secret Service agents hiring prostitutes in Colombia.
But that doesn't matter, since the allegations against Menendez are "completely false." Right? Well, not so fast. Apparently the FBI has been investigating Menendez and at least one of his major supporters for a while now. The kicker here: some of the prostitutes that Menendez supposedly availed himself of may have been underage. Last night, FBI agents hauled away van-loads of evidence from the Palm Beach home of long-time Menendez supporter Dr. Salomon Melgen, who owns a residence in the Dominican Republic (and a private jet) often utilized by Menendez and who has contributed some $357,000 to Democratic groups and individuals (around $30,000 directly to Menendez) across the last decade or so, even though Melgen owes over $10 million in unpaid taxes to the IRS.

A couple things jump out at me, with regard to all of this. First, why is a Florida-based doctor so deeply involved with a New Jersey politician? I guess they could be friends from way back, or maybe the good doctor used to be based in in New Jersey. Though the evidence doesn't point that way at all:

Soon after completing his training at Harvard University in 1986, Melgen, who was born and raised in Dominican Republic and experienced first hand the struggles of being an immigrant, became the first surgeon to perform outpatient retina surgery in South Florida, and became a pioneer in laser therapy.

Dr. Melgen has an exceedingly impressive resume, there's no doubt about that. And he's apparently a major philanthropist, as well. But none of this explains his tax problems. And that's the second thing that jumps out at me here: why is someone so deeply in debt to the IRS tossing around so much money to politicians? The answer, I think, is obvious.

Some time ago--back in 2010--it came to light that Menendez has actively petitioned the Feds to rescue First BankAmericano--based in New Jersey--before it failed. Menendez failed to disclose that the chairman and vice-chairman--along with numerous board members--of the bank were major supporters to his campaigns. This points to something: a willingness on the part of Menendez to intercede on behalf of supporters with serious financial problems. Melgen would seem to qualify. And I wouldn't be surprised to find out that Melgen had some level of involvement in this bank, as well, though I can find no evidence in this regard.

Fearing that investors would redeem more money from the funds - money the funds may not have had, according to investigators - the firm's principals raced to stop the outflows. One of their biggest investors who was ready to bolt late last year was a local eye surgeon, Dr. Salomon E. Melgen.

By last fall, Dr. Melgen intended to withdraw some of the $12.3 million investment that he and a holding company he controlled had already given to John Kim to manage, according to a lawsuit he filed against the advisory firm and its principals. (Mr. Melgen's lawyer said he would not comment for this article.) Instead, in October, John Kim and Mr. Lee signed a document that guaranteed that Dr. Melgen's $12.3 million would be repaid at the end of January 2005, according to the document. The money was to be set aside in a separate account and traded only by John Kim.

Dr. Melgen had invested an additional $7 million in one of KL's funds and put $1 million in a separate account under an agreement that would allow Mr. Kim to use an airplane owned by Dr. Melgen. Within four months of Dr. Melgen's receiving the signed guarantee, his $20 million investment had disappeared, according to the lawsuit.

Wait, what? A $20 million investment? That was a helluva first fifteen years as an eye doctor, no? But I guess this could be part of the reason why Meglen is on the hook for so much money to the IRS. Still, he seems to be retaining ample resources, even after losing this huge chunk of change. And a couple of years ago, Won Sok Lee--who had been on the lam--was apprehended and sentenced to 30 years in jail...and ordered (along with the other two principals) to pay back investors a total of some $78 million. I don't know if that money has been paid out, or not. If it had been, perhaps Dr. Meglen might make good on what he owes Uncle Sam. Or maybe he already did use it to pay a previous IRS bill of $6.2 million back in 2011.

Regardless, there's a lot of money involved in this story; it goes way beyond shortchanging prostitutes. And if there is an issue of Federal involvement, it's certainly good to have friends in Washington, D.C. Menendez's guilt may be up in the air, but there's very little here that looks good for him. At the very least, this all suggests he's not very good at choosing friends, but I think that's far too generous. I think there's a big financial screw-job buried in here, something reaching from New Jersey to Palm Beach to the Dominican Republic. Perhaps some of our more intrepid investigative reporters--like those at 60 Minutes--will take up the gauntlet, as opposed to running fluff pieces on the President and the out-going Secretary of State.